State Bank Of India vs Mr. Hiren Patel

The Interim Resolution Professional examined the Application under Section 95 of IBC, along with documents annexed thereto. ii. Response is not yet received from the Personal Guarantor. iii. The said debt for which an application has been filed by the creditor is registered with National E-Governance Services Limited (“NESL”). iv. The Interim Resolution Professional had sent intimation under Section 99(2) of IBC to the Personal Guarantor by E-mail and letter on 10.04.2024 requiring to prove repayment of the debt as mentioned in captioned Application the said letter and email along with the RPAD is enclosed as Annexure-A2. No reply is received in that regard from the Personal Guarantor. The RP also gave intimation to the Appellant Bank, State Bank of India on 10.04.2024 by email and letter seeking details of any loan repayment by the PG against the outstanding debt. Copy of the email and letter is enclosed as Annexure-A3. Reply received in that regard from the Respondent Bank on 18.04.2024 is enclosed as Annexure –A4 and Annexure – A4.1 respectively.

The applicant Bank has provided a suitable reply to the information sought but no response is received from the Personal Guarantor till date.

The Interim Resolution Professional has examined the application and ascertained that the application satisfies the requirements set out in Section 95 of the IBC. vii. Upon examination of the Application and Annexures by the Interim Resolution Professional, it is recommended that the application may be accepted. viii. The Interim Resolution Professional based on the application and supporting documents finds that the debtor is not eligible for a Fresh Start under Chapter II of IBC, 2016. ix. The Interim Resolution Professional examined the Application, supporting documents and reply received from the Personal Guarantors and record the following reasons for the acceptance of the Application:

Thus, in view of the aforesaid, IRP recommend the acceptance of the captioned application filed under Section 95 of IBC, 2016.

It is stated and submitted that the Respondent has not been served with the demand notice under Section 95 of the Code r/w Rule 7 of the said Rules. It is stated and submitted that the Applicant has enclosed demand notice addressed to one Mrs. Nehal C. Panchal and not to the Respondent. It is submitted that in absence of service of demand notice invoking guarantee, the present petition deserves to be dismissed on the said ground alone.

It is pertinent to note that the Hon'ble NCLT at New Delhi in the matter of State Bank of India vs. Ms. Jaya Singh (Company Petition No. 411 of 2021) has inter alia held as follows:

It is submitted that the said Petition is filed inter alia invoking the guarantees given by the Respondent in respect of M/s. Archon EngiconLtd.(hereinafter referred to as "Corporate Debtor"). It is submitted that as per the Applicant's own case, the said account of the Corporate Debtor is claimed to have been declared as a NPA with effect from 31.03.2015, whereas, the present petition is filed only on 11.01.2024. It is stated and submitted that the present petition has been filed after a period of more than 3 years from the date of the NPA and that too without invocation of guarantee and service of demand notice and hence is barred by law of limitation. Further, it is stated and submitted that as per the records of the Information Utility also the date of default is 01.01.2015. It is submitted that as per the Applicant's own FIR, the Applicant has stated that the account of the Borrower was declared as NPA w.e.f. 31.03.2015.

Further, the Respondent denies that the alleged debt has been acknowledged by the Debtor from time to time by OTS offers. It is denied that the in light of letters dated 31.03.2018 and 08.01.2018, the amount of debt has been acknowledged by the Debtor and hence the debt can be recovered from the guarantor. At the outset, it is submitted that the there is no acknowledgment of debt as claimed by the Applicant. Further, it is submitted that the Respondent is not aware of any such alleged letters dated 31.03.2018 and 08.01.2018 and the Applicant has not produced the same. Further, the Respondent was not even a party to the said alleged letters.

It is submitted that even if the borrower has executed such letters, the same would not extend the period of limitation in terms of Section 135 of the Contract Act, 1872. For the sake of convenience, Section 135 of the Contract Act, 1872 is re-produced herein below:

It is submitted that the Appellant's reliance on order dated 03.08.2021 passed by the Hon'ble DRT in OA 83 of 2017 is misplaced and the same does not extend the period of limitation. It is a well settled law and has been reiterated by the Hon'ble NCLAT in Bimalkumar Manubhai Savalia v. Bank of India and Ors. CA(AT) (Ins.) No. 1166 of 2019that the proceedings under SARFAESI Act and DRT proceedings does not extend the period of limitation.

It is submitted that the guarantee is void under law as the same is without consideration. It is submitted that Section 127 of the Contract Act, 1872, provides that the guarantee without consideration is void. It is submitted that there is no consideration and hence petition deserves to be dismissed.

It is stated and submitted that as the effect of the account being declared as NPA was with effect from 31.03.2015, no new guarantee could have been executed on 02.07.2015. It is submitted that the operation of such guarantee would cease and such guarantee would become void after the account has been declared as NPA. Further, it is submitted that even as per Section 133 of the Contract Act, 1872, the guarantor is discharged from the all the subsequent variance in terms of the contract entered into without the consent of the guarantor. It is submitted that as the account of the guarantor was already declared as NPA w.e.f. 31.03.2015 and the Guarantee Agreement came into effect on 02.07.2015, the subsequent variance is void as per Section 133 of the Contract Act, 1872.

It is submitted that the present application has not been filed in accordance with the Code and the said Rules. It is submitted that Section 95 of the Code requires that the Application shall be accompanied with details and documents relating to-

the debts owed by the debtor to the creditor or creditors submitting the application for insolvency resolution process as on the date of application;

the failure by the debtor to pay the debt within a period of fourteen days of the service of the notice of demand; and

relevant evidence of such default or non-repayment of debt.

It is submitted that the Appellant has failed to comply the aforesaid requirements. Further, it is submitted that the Applicant has filed the case in its individual capacity but has claimed the total amount of Rs. 341.71 crore which is the amount claimed by the consortium of banks including IDBI, UBI and Bank of Baroda. It is submitted that the Applicant has failed to specify the debt due to the Applicant and in absence of such details, the captioned application deserves to be dismissed.

Further, it is submitted that the appellant has not followed the terms and conditions of the sanction letter dated 05.03.2014 and has not taken mortgage of the following properties.

Sector 2/D, Plot No. 1074 (Shri Hari Park Society) Nr. Swaminarayan Mandir, Gandhinagar (Gujarat). Land admeasuring 330 sq. mtrs. and construction of 205.80 sqr. Mtrs.

Land at Plot No. 17, Pushpak Co-Operative Housing Society Limited, Opposite Rudra Appartment, Behind Central Bank, Navsari admeasuring 180.20 sqr. Mtrs.

Land at Plot No. 18, Pushpak Co-Operative Housing Society Limited, Opposite Rudra Appartment, Behind Central Bank, Navsari admeasuring 180.20 sqr. Mtrs.

It is stated and submitted that the Petitioner has filed the Petition by suppressing material facts and without placing on record any document to prove the debt and default. It is stated and submitted that no amounts is due and payable by the Respondent. It is stated and submitted that the Petitioner's claim is wholly untenable. It is submitted that the Respondent does not owe any amount as debt or otherwise to the Petitioner so as to make them liable for an action under the IBC. It is submitted that no alleged dues are outstanding. It is submitted that the Petitioner's sole motive is to pressurize the Respondent so as to extort money out of the Respondent. It is further stated and submitted that the guarantee is without consideration and hence void. It is submitted that the Respondent is discharged and absolved from the guarantee under law. It is further submitted that any and all variance in terms of the contract without the consent of the surety is void.

That the Respondent denies any liability for the sum as claimed in the petition or any part thereof. It is denied that there are any dues outstanding from Respondent as suggested by the Petitioner. The alleged dues claimed by State Bank of India are false Without prejudice to the submission that no amount is due and payable by the Respondent, it is stated and submitted that interest has been claimed in an absolutely illegal manner and in a manner contrary to the provisions of law. It is stated and submitted that the Applicant has not even taken as mortgage all the properties as securities as mentioned in the sanction letter. Further, the Applicant has chosen to file the present petition without realizing the securities of the borrower.

At the outset, the Financial Creditor would like to address the contention of the Respondent Personal Guarantor that they have not been served with the Demand Notice issued by SBI as per Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. It is submitted that the same is false. The Personal Guarantor has intentionally suppressed the facts of receipt of the Demand Notice dt. 15.12.2021, issued under FORM-B. The said notice was replied to by the Respondent Personal Guarantor as well. That the notice attached in the Main Application is the one issued to Ms. Nehal Panchal, who, along with the present Respondent, is one of the Personal Guarantors of the Corporate Debtor. It is submitted that it is trite law that a substantive right accrued to a litigant should not be defeated citing procedural defects capable of being cured. Reliance is placed on (Ramnath Exports (P) Ltd. v. Vinita Mehta, (2022) 7 SCC 678) by the Financial Creditor. The Respondent Personal Guarantor already has a copy of the said notice in their possession which is quite evident from the fact that the Respondent Personal Guarantor replied to the same vide its letter dt. 04.01.2022. In spite of the same, the Respondent Personal Guarantor has stated on oath that they have not been served with the Demand Notice which is clear suppression of facts. We are now placing the concerned notice dt. 15.12.2021 issued to Mr. Hiren Patel and the Reply dt. 04.01.2022 issued by Mr. Hiren Patel to SBI with the purpose to correct the record of the Ld. NCLT.

Furthermore, the present Respondent, Hiren Patel, and their Reply dt. 04.01.2022 to the Demand Notice dt. 15.12.2021, had responded as below: -

That the Financial Creditor SBI submits that all the contentions made by the Respondent Personal Guarantor in their Reply dt. 04.01.2022 are denied and states as under: -

The Application filed u/s. 95, IBC by State Bank of India is not barred by limitation and is maintainable in nature. It is submitted that the account of the Corporate Debtor, M/s. Archon Engicon was declared an NPA by SBI on 01.02.2016. That SBI, along with other Creditor Banks initiated proceedings before Ld. Debts Recovery Tribunal against the Corporate Debtor and the Personal Guarantors including the Respondent, well within the three (3) year limitation period, on 14.02.2017. That the Ld. DRT passed an order in favour of the Financial Creditors directing the Corporate Debtor and the Personal Guarantors including the Respondent to pay SBI Rs. Rs. 195,24,46,964.66 (including Rs. 45,98,34,721.74 to be paid to erstwhile State Bank of Patiala (now State Bank of India)) along with pendent lite interest and future interest due @12% per annum along with penal interest @2% penal interest, vide Order dt. 03.08.2021. It is submitted that the said order created a new cause of action in favour of the SBL. That it is settled law that the order of Debts Recovery Tribunal gives a fresh cause of action to the Financial Creditor to file an Application under IBC. (Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy, (2021) 10 SCC 330 para no. 133). Therefore in pursuance of the same, SBI invoked the guarantee vide Notice dt. 15.12.2021 thereby calling upon the Respondent Personal Guarantor to repay the debt within 14 days of the receipt of the notice. That the 14-day period 7 concluded on 29.12.2021 and the Respondent failed to repay the debt thus the date of default was considered to be 29.12.2021. Considering 29.12.2021 to be the date of default, the Main Application filed on 23.12.2023 is well-within the three-year limitation period under Art. 137, Limitation Act, 1963. Even other- wise, it is submitted that the Main Application was filed within the date of the DRT Order i.e. 03.08.2021, through which a fresh cause of action had arisen in favour of SBI.

To enlarge upon the submission made above, it is submitted that the Corporate Debtor, M/s. Archon Engicon had been availing financial assistance from the State Bank of India since 2011 which was renewed from time to time. That the Respondent Personal Guarantor along with other Personal Guarantors, entered into a deed of Guarantee on 02.07.2015 for the credit facilities granted to the Corporate Debtor by the Consortium of Banks led by State. Bank of India. That the debt as against the Corporate Debtor fell due on 01.02.2016 when the account of the Corporate Debtor was classified as an NPA.

That the State Bank of India along with other financial creditors initiated proceedings /s. 19 of the Recovery of Debts & Bankruptcy Act, 1993 bearing O.A. No. 83 of 2017 on 14.02.2017. before the Ld. Debts Recovery Tribunal. In the meanwhile, the debt owed to the State Bank of India was also acknowledged vide letter dt. 31.03.2018. That the Ld. Debts Recovery Tribunal passed an order dt. 03.08.2021 in favour of the financial creditors directing the Defendants, including the Respondent Personal Guarantor to pay the dues to the Financial Creditors within 2 months.

Thereafter, the State Bank of India issued a demand notice to the Respondent Personal Guarantor as per Rule 7(1) of the IBC (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules. 2019 on 15.12.2021 thereby asking the Personal Guarantor to repay the debt within 14 days of receipt of the Notice failing which insolvency resolution process under IBC would be initiated against the Personal Guarantor. That the 14-day period from 15.12.2021 ended on 29.12.2021 when the default occurred as per the Demand Notice issued by State Bank of India.

That in lieu of the settled law in place, the Financial Creditor could file the Application u/s. 95, IBC within three years of the date when default occurred vide Art. 137, Limitation Act, 1963 ie, three years from 29.12.2021. Besides, the Order dt. 03.08.2021 where the Personal Guaranter is the Defendant no. 5, gave a fresh cause of action in favour of SBI by which SBI could file an Application under s. 95, IBC within three (3) years ie. 03.08.2024. That therefore the present Main Application u/s. 95, IBC was filed on 23.12.2023 which is well-within the period of limitation u/Art. 137, Limitation Act, 1963.

IRP has recommended to accept the application for the reason as stated in the report dated 02.05.2024. ii. The Respondent has admitted to have executed the Guarantee Agreement. iii. Hon'ble DRT vide order dated 03.08.2021 passed in O.A. No. 83 of 2017 has confirmed the amount and issued recovery certificate against the Respondent/Guarantor and others after considering the loan/security documents as well as guarantee agreement in question and the said action has assumed finality. iv. The Applicant has demanded the amount outstanding from the Respondent vide Demand Notice dated 15.12.2021.

Decree of Hon'ble DRT has given a fresh cause of action to the Applicant.

The copy of the petition and the report was duly served upon the Corporate Debtor in terms Rule 7(3) which is under liquidation as confirmed by the counsel appearing for the liquidator of the Corporate Debtor.

Resolution Professional report states that no evidence was placed before him by the Respondent having paid the amount demanded by the Applicant and as such in over view entire amount demanded is un-serviced as on the date of order.

I. Initiate Insolvency Resolution Process against the Respondent/Personal Guarantor and moratorium in relation to all the debts is declared, from today i.e. date of admission of the application and shall cease to have effect at the end of the period of 180 days, or this Tribunal passes order on the repayment plan under Section 114 whichever is earlier as provided under Sec 101 of IBC, 2016. During the moratorium period,

Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed, and

The creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt; and

The debtor shall not transfer, alienate, encumber, or dispose of any of his assets or his legal rights or beneficial interest therein:

The provisions of this section shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

II. The Resolution Professional viz., Mr. Pravincharan Prafulcharan Dwary, having Registration No: IBBI/IPA-002/IP-N00331/2017-2018/10937 having address at: 407, Akchhat Tower, Pakwan Cross Road, S. G. Highway, Bodakdev, Ahmedabad - 380 015, (E-mail ID: [email protected]) who was appointed when the Section 97 application was allowed vide Order dated 02.04.2024, is directed to cause a public notice published on behalf of the Adjudicating Authority within 7 days of passing this Order on the website of the NCLT Ahmedabad Bench, inviting claims from all Creditors, within 21 days of such issue The notice under Sub Section (1) of Section 102(2) shall include: -

details of the order admitting the application;

particulars of the resolution professional with whom the claims are to be registered; and

the last date for submission of claims.

III. The publication of notice shall be made in two newspapers, one in English and other in Vernacular which have wide circulation in the State where the Corporate Debtor and Personal Guarantor resides. The Resolution Professional shall furnish two spare copies of the notice to the Registry for the record.

IV. The Resolution Professional in the exercise of the powers conferred under Section 104 shall prepare a list of creditors on the basis of

the information disclosed in the application filed by the debtor under Sections 94 or 95 as the case may be, and

Claims received by the Resolution Professional under Section 102 within 30 days from the date of the notice.

V. The repayment plan may authorize or require the Resolution Professional to:

Carry on the debtor's business or trade on his behalf or in his name; or

Realise the assets of the debtor; or

Administer or dispose of any funds of the debtor.

Justification for preparation of such repayment plan and reasons based on which the creditors may agree upon the plan;

Provision for payment of fee to the Resolution Professional;

Such other matters as may be specified.

VI. The Resolution Professional shall submit the repayment plan along with his report on the plan to this Authority within a period of 21 days from the last date of submission of claims, as provided under Section 106.

VII. In case the Resolution Professional recommends that a meeting of the creditors is not required to be called, he shall record the reasons therefor. If the Resolution Professional is of the opinion that a meeting of the creditors should be summoned, he shall specify the details as provided under Section 106(3) of IBC, 2016. The date of meeting should not be less than 14 day or more than 28 days from the date of submission of the Report under sub-section (1) of Section 106 of IBC, 2016, for which at least 14 days' notice to the creditors (as per the list prepared shall be issued by all modes. Such notice must contain the details as provided under the provisions of Section 107 of IBC, 2016.

VIII. The meeting of the creditors shall be conducted in accordance with Sections 108, 109, 110 & 111 of IBC, 2016. The Resolution Professional shall prepare a report of the meeting of the creditors on repayment plan with all details as provided under Section 112 of IBC, 2016 and submit the same to this Tribunal, copies of which shall be provided to the Debtor and the Creditors. It is made clear that the Resolution Professional shall perform his functions and duties in compliance with the Code of Conduct provided under Section 208 of IBC, 2016.

IX. The Resolution Professional shall submit his periodic reports before this Tribunal, every 30 days.

X. The Registry is directed to communicate a copy of order, report and application within seven working days and upload the same on the website immediately after the pronouncement of order.